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The zones of discrimination for M-Score is as such:
An M-Score of less than -2.22 suggests that the company is not an accounting manipulator.
An M-Score of greater than -2.22 signals that the company is likely an accounting manipulator.
During the past 13 years, the highest Beneish M-Score of Vonage Holdings Corp was 0.99. The lowest was -5.34. And the median was -2.99.
The M-score was created by Professor Messod Beneish. Instead of measuring the bankruptcy risk (Z-Score) or business trend (F-Score), M-score can be used to detect the risk of earnings manipulation. This is the original research paper on M-score.
The M-Score Variables:
The M-score of Vonage Holdings Corp for today is based on a combination of the following eight different indices:
|M||=||-4.84||+||0.92 * DSRI||+||0.528 * GMI||+||0.404 * AQI||+||0.892 * SGI||+||0.115 * DEPI|
|=||-4.84||+||0.92 * 1.7257||+||0.528 * 1.0652||+||0.404 * 1.1012||+||0.892 * 1.0676||+||0.115 * 0.9288|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.931||+||4.679 * -0.0731||-||0.327 * 1.0591|
* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $36.7 Mil.|
Revenue was 246.763 + 248.359 + 233.675 + 226.824 = $955.6 Mil.
Gross Profit was 150.227 + 152.391 + 149.245 + 148.608 = $600.5 Mil.
Total Current Assets was $102.3 Mil.
Total Assets was $940.4 Mil.
Property, Plant and Equipment(Net PPE) was $48.4 Mil.
Depreciation, Depletion and Amortization(DDA) was $72.3 Mil.
Selling, General & Admin. Expense(SGA) was $454.3 Mil.
Total Current Liabilities was $194.4 Mil.
Long-Term Debt was $300.3 Mil.
Net Income was 0.001 + 9.078 + 0.897 + 7.931 = $17.9 Mil.
Non Operating Income was -0.109 + -0.495 + 0.104 + 0.154 = $-0.3 Mil.
Cash Flow from Operations was 21.757 + 26.694 + 23.989 + 14.572 = $87.0 Mil.
|Accounts Receivable was $19.9 Mil.
Revenue was 230.124 + 223.36 + 221.858 + 219.73 = $895.1 Mil.
Gross Profit was 153.014 + 147.961 + 149.432 + 148.687 = $599.1 Mil.
Total Current Assets was $136.8 Mil.
Total Assets was $784.6 Mil.
Property, Plant and Equipment(Net PPE) was $49.5 Mil.
Depreciation, Depletion and Amortization(DDA) was $62.0 Mil.
Selling, General & Admin. Expense(SGA) was $457.0 Mil.
Total Current Liabilities was $190.9 Mil.
Long-Term Debt was $198.8 Mil.
1. DSRI = Days Sales in Receivables Index
A large increase in DSR could be indicative of revenue inflation.
|DSRI||=||(Receivables_t / Revenue_t)||/||(Receivables_t-1 / Revenue_t-1)|
|=||(36.688 / 955.621)||/||(19.913 / 895.072)|
2. GMI = Gross Margin Index
Measured as the ratio of gross margin in year t-1 to gross margin in year t.
Gross margin has deteriorated when this index is above 1. A firm with poorer prospects is more likely to manipulate earnings.
|=||(GrossProfit_t-1 / Revenue_t-1)||/||(GrossProfit_t / Revenue_t)|
|=||(599.094 / 895.072)||/||(600.471 / 955.621)|
3. AQI = Asset Quality Index
AQI is the ratio of asset quality in year t to year t-1.
|AQI||=||(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t)||/||(1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)|
|=||(1 - (102.281 + 48.415) / 940.422)||/||(1 - (136.807 + 49.483) / 784.566)|
4. SGI = Sales Growth Index
Ratio of sales in year t to sales in year t-1.
Sales growth is not itself a measure of manipulation. However, growth companies are likely to find themselves under pressure to manipulate in order to keep up appearances.
5. DEPI = Depreciation Index
Measured as the ratio of the rate of depreciation in year t-1 to the corresponding rate in year t.
DEPI greater than 1 indicates that assets are being depreciated at a slower rate. This suggests that the firm might be revising useful asset life assumptions upwards, or adopting a new method that is income friendly.
|DEPI||=||(Depreciation_t-1 / (Depreciaton_t-1 + PPE_t-1))||/||(Depreciation_t / (Depreciaton_t + PPE_t))|
|=||(62.024 / (62.024 + 49.483))||/||(72.285 / (72.285 + 48.415))|
6. SGAI = Sales, General and Administrative expenses Index
The ratio of SGA expenses in year t relative to year t-1.
SGA expenses index > 1 means that the company is becoming less efficient in generate sales.
|SGAI||=||(SGA_t / Sales_t)||/||(SGA_t-1 /Sales_t-1)|
|=||(454.273 / 955.621)||/||(457.049 / 895.072)|
7. LVGI = Leverage Index
The ratio of total debt to total assets in year t relative to yeat t-1.
An LVGI > 1 indicates an increase$sgai= in leverage
|LVGI||=||((LTD_t + CurrentLiabilities_t) / TotalAssets_t)||/||((LTD_t-1 + CurrentLiabilities_t-1) / TotalAssets_t-1)|
|=||((300.264 + 194.426) / 940.422)||/||((198.755 + 190.928) / 784.566)|
8. TATA = Total Accruals to Total Assets
Total accruals calculated as the change in working capital accounts other than cash less depreciation.
|=||(NetIncome_t - NonOperatingIncome_t||-||CashFlowsfromOperations_t)||/||TotalAssets_t|
|=||(17.907 - -0.346||-||87.012)||/||940.422|
An M-Score of less than -2.22 suggests that the company will not be a manipulator. An M-Score of greater than -2.22 signals that the company is likely to be a manipulator.
Vonage Holdings Corp has a M-score of -2.03 signals that the company is likely to be a manipulator.
Altman Z-Score, Piotroski F-Score, Accounts Receivable, Revenue, Gross Profit, Total Current Assets, Total Assets, Property, Plant and Equipment, Depreciation, Depletion and Amortization, Selling, General & Admin. Expense, Total Current Liabilities, Long-Term Debt, Net Income, Non Operating Income, Cash Flow from Operations
Vonage Holdings Corp Annual Data
Vonage Holdings Corp Quarterly Data